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Emmis Files Suit Against Shareholders

3-26-2012

Emmis Communications is attempting to amend its corporate documents. As a result, preferred shareholders will lose the right to certain dividends, lose the right to force the purchases of their shares, lose the right to convert their preferred shares to common stock, and lose the right to vote separately on mergers, share exchanges and transactions, among other things. Emmis states in the lawsuit that preferred shareholders owning less than 1/3rds of the preferred stock are opposed to this restructuring. Those preferred shareholders claim that the restructuring is illegal.

Emmis, in a preemptive move, filed this lawsuit asking the Indiana courts to declare that its plans to restructure the preferred shares is legal, thus forcing the unhappy preferred shareholders to defend now, rather than wait until later to challenge the restructuring. The current preferred shareholders must vote on the proposed amendment by at least a 2/3rds vote. To obtain this vote, it appears as if Emmis has already made a deal with preferred shareholders owning at least 2/3rds of all preferred shares to obtain their vote in favor of these amendments and restructuring.